Microsoft Small Business Server 2003 is designed to court small business in a big way. Now in its third iteration, the system is showing some polish, and the company has sweetened the pot with aggressive pricing and more permissive (though not perfect) licensing rules.

SBS 2003 is a bundle of several products, all of which run on one server. The $599 Standard Edition includes Windows Server 2003, Exchange Server 2003, and Outlook 2003, along with five Client Access Licenses (CALs), which you need either for each computer or for each user. The $1,499 Premium Edition adds SQL Server 2000, ISA Server 2000 (for network security and proxy server functions), and FrontPage 2003 (for Web design). Each component delivers improvements substantial enough to recommend SBS 2003 to both existing users and newcomers.

Microsoft includes a Quick Start setup chart, guiding you pictorially through the setup steps. But as easy as the Setup Wizard makes things, the only small businesses owners who will be able to set SBS up by themselves are computer professionals. Setting up a network is just too complicated for nontechnical users to do without a consultant or system integrator. We tested the preloaded configuration.

The preloaded version boots into a Setup Wizard that configures the network and client systems. The wizard does an excellent job of covering common decisions, such as whether you have the server connected directly to the Internet or to an external router. SBS 2003 detected our Linksys router and allowed us to use it for DHCP (or you could choose to use SBS 2003's built-in DHCP server). At the end of the wizard, a to-do list appears and walks you through the remaining setup steps.

The to-do list instructs you to set up the server software, including options for a certificate for secure access, firewall (if appropriate to the configuration), and more. The procedures are thick with security options, such as setting up password policies and having Exchange strip out executable attachments.

One of the initial procedures configures client setup, and the process is easy and automated. Only Windows 2000 and XP clients are directly supported; PCs running earlier versions of Windows can be set up manually. After giving SBS 2003 the names of computers to set up, we used each client to browse a special page on the Web server and followed instructions to connect the client system computer to the domain. When you then log on to the domain from the client, applications and service packs are pushed to that client system.

Easily our favorite features in SBS 2003 are remote access and remote administration. SBS 2003 includes VPN support, but better options are available without the hassle of setting up a full-blown VPN. You can access many network functions that reside on the serverincluding your e-mail through Outlook Web Accessdirectly through the built-in Web site on the server. After logging on from a remote system to the secure Web site on SBS 2003, we connected to Remote Desktop on our Windows XP network clients. Another welcome feature of SBS 2003 is that it nudges you to create a plan for backing up your server, even if it's only to back up the data directories to a separate folder on the network.

A limitation in the previous version of the product prevented you from running additional servers for certain processes you wanted to isolate, such as Exchange. The good news is that SBS 2003 does allow you to run extra servers; the bad news is that you can't take the programs that came with SBS 2003 and run them on any system other than the server where SBS 2003 itself is installed. So if you want to run SQL Server on another box, you need to buy a second copy of SQL Server. Not only will this cost you more money, but best practices argue against running so many critical network functions on a single server system, as SBS does.

We also discovered that when SBS 2003 sets up users on client systems, it gives those users local administrator accounts. Microsoft does this in order to avoid problems with applications, but such a solu-tion is less than ideal in these security-conscious times, and it creates the potential for serious problems if a client system is compromised (say, by a Trojan horse program).

So although we don't agree with all the choices Microsoft made, it's hard to beat the value and powerful out-of-the-box functionality, especially in remote access. The vast majority of Win NT 4.0based small businesses should move to this product quickly, and quite a few Windows 2000 customers would be better off with it as well.